Building on Fifteen Years of Customer Success

Transcription

1 Building on Fifteen Years of Customer Success Salesforce Analyst Day 2014 October 13, 2014

2 Safe Harbor Safe harbor statement under the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements, the achievement or success of which involves risks, uncertainties, and assumptions. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, the results of salesforce.com, inc. could differ materially from the results expressed or implied by the forwardlooking statements we make. The risks and uncertainties referred to above include but are not limited to risks associated with possible fluctuations in our financial and operating results; our rate of growth and anticipated revenue run rate, including our ability to convert deferred revenue and unbilled deferred revenue into revenue and, as appropriate, cash flow, and our ability to grow deferred revenue and unbilled deferred revenue; errors, interruptions or delays in our service or Web hosting; breaches of our security measures; the financial impact of any previous and future acquisitions; the nature of our business model; our ability to continue to release, and gain customer acceptance of, new and improved versions of our service; successful customer deployment and utilization of our existing and future services; changes in our sales cycle; competition; various financial aspects of our subscription model; unexpected increases in attrition or decreases in new business; our ability to realize benefits from strategic partnerships; reliance on third-party computer hardware and software; the emerging markets in which we operate; unique aspects of entering or expanding in international markets; our ability to hire, retain and motivate employees and manage our growth; changes in our customer base; technological developments; regulatory developments; litigation related to intellectual property and other matters, and any related claims, negotiations and settlements; unanticipated changes in our effective tax rate; factors affecting our outstanding convertible notes and credit facility; fluctuations in the number of shares we have outstanding and the price of such shares; foreign currency exchange rates; collection of receivables; interest rates; factors affecting our deferred tax assets and ability to value and utilize them, including the timing of achieving profitability on a pretax basis; the potential negative impact of indirect tax exposure; the risks and expenses associated with our real estate and office facilities space; and general developments in the economy, financial markets, and credit markets. Further information on these and other factors that could affect the financial results of salesforce.com, inc. is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including our most recent Form 10-K. These documents are available on the SEC Filings section of the Investor Information section of our website at Any unreleased services or features referenced in this or other presentations, press releases or public statements are not currently available and may not be delivered on time or at all. Customers who purchase our services should make their purchase decisions based upon features that are currently available..

3 years Salesforce Advantage Economic Model 15 Financial Review Market Opportunity

4 Mark Hawkins CFO

5 15 years Financial Review Market Opportunity Salesforce Advantage Economic Model

6 15 Years of Customer Success in the Cloud 150, ,000+ customers employees ~450B $5B+ transactions revenue Note: Represents revenue run rate as of Q2 15. Customer count includes customers on Force.com and ExactTarget. Transactions represent trailing four quarters as of Q2 15.

7 Strong and Consistent Growth to $5 Billion Plus $5.3B+ $1.3B+ 30%+ $893M $1.3B Q114 Q214 Q314 Q414 Q115 Q215 Quarterly Revenue Note: FY 15 estimate based on Q2 15 revenue run rate of $1.319 billion. FY10 FY11 FY12 FY13 Full Year Revenue FY14 FY15E

8 Deferred Revenue Drives Top Line Growth $5.0B $2.4B $700M FY10 $1.0B FY11 FY12 FY13 FY14 Billed Deferred Revenue Q215 FY10 FY11 FY12 FY13 FY14 Q215 Unbilled Deferred Revenue Note: FY 14 Billed Deferred Revenue includes a benefit from our acquisition of ExactTarget of $99 million. Unbilled deferred revenue, or Backlog, represents approximate balance of business that is contracted but not invoiced.

9 Q2 FY15: Strong Growth Across the World Americas EMEA APAC $941M $247M $131M +39% y/y +36% y/y +27% y/y Note: Dollars represent Q2 15 revenue dollars. Percentages represent Q2 15 Y/Y constant currency revenue growth.

10 FX is Becoming a Headwind $1.45 EUR/USD 70 USD/JPY $ $1.35 $ $1.25 $1.20 Sep-11 Sep-12 Sep-13 Sep Sep-11 Sep-12 Sep-13 Sep-14 FY16: Expecting $125M-$150M FX Revenue Headwind Y/Y Note: Data from oanda.com historical FX rates, weekly from 9/4/11-10/5/14. USD/JPY scale inverted.

11 Best-in-Class Gross Margin Creates Structural Advantage 79.4% 81.8% FY10 FY11 FY12 FY13 FY14 Total Non-GAAP Gross Margin FY15 YTD Note: Non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, and net non-cash interest expense. A complete reconciliation of GAAP to non-gaap measures can be found in the Appendix and at 1Source: Company filings; all gross margins based on first half of current calendar year results.

12 Tracking to bps Y/Y Operating Margin Improvement 16.5% 10.4% FY10 FY11 FY12 FY13 FY14 FY15 YTD Non-GAAP Operating Margin Note: Targeting bps non-gaap Operating Margin improvement for full fiscal year 2015 year-over-year. Non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, and net non-cash interest expense. A complete reconciliation of GAAP to nongaap measures can be found in the Appendix and at

13 Strong Operating Cash Flow with Consistent Yield Percent of CapEx Spend $719M ~ 15% ~ 40% 21% 28% 5% 26% 7% 24% 6% 22% 28% 7% 5% 4% FY10 FY11 FY12 FY13 FY14 FY15 YTD Operating Cash Flow Note: Percent of CapEx spend represents trailing four quarters as of Q2 15. OCF Yield ~ 45% CapEx as % of Revenue Leasehold Improvements Datacenters Other

14 Employee Base has More Than Tripled Since FY10 15,000+ ~4,000 FY10 FY11 FY12 FY13 Employee Headcount FY14 Q215

15 Growth / Operating Margin Framework High Growth Growth Low Growth Priority Top Line Top & Bottom Line Bottom Line Revenue Growth > 30% 20%-30% < 20% Op. Margin1 Flat to Up Slightly bps bps OCF Growth < Revenue Growth Revenue Growth > Revenue Growth Mid-30s long-term op margin at maturity 1. Op. Margin is non-gaap. Non-GAAP measures exclude the effects of stock-based compensation, amortization of purchased intangibles, and net noncash interest expense. A complete reconciliation of GAAP to non-gaap measures can be found in the Appendix and at In addition, revenue growth in constant currency terms, and operating margin does not take into consideration the potential impact from future acquisitions.

16 15 years Financial Review Market Opportunity Salesforce Advantage Economic Model

17 CRM Market Leads Enterprise Software in Growth 16% 12% 11% 10% 10% 10% 9% 9% $14B TAM (CY13) $17B $5B $4B $9B $4B $31B $2B TAM (CY18) $35B $9B $6B $15B $7B $51B $3B 8% 7% $19B $21B $22B $28B $31B Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; Percentages represent CAGR from CY13-CY18. CRM Market defined as combination of the Sales, Customer Service and Support, and Marketing market segments; ECM = Enterprise Content Management; Collaboration = Web Conferencing, Collaboration/Social Software; SCM = Supply Chain Management, Data Integration = Data Integration Tools and Data Quality Tools; DBMS = Database Management Systems; PPM = Project and Portfolio Management; BI = Business Intelligence and Analytics; App. Middleware = Application Infrastructure and Middleware.

18 Consistent and Deliberate TAM Expansion Source: Salesforce company data and industry reports

19 Salesforce Wave: First Native Cloud Analytics Platform Fast search based analytics Intuitive game-inspired user experience Connected any data from any source

20 We Have a Huge Addressable Market Legend TAM (CY13) TAM (CY18) CAGR (CY13-CY18) TAM with Analytics Current TAM $48B CRM Market $35B $17B $62B $35B 12% $82B 11% 16% Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; Percentages represent CAGR from CY13-CY18. CRM Market defined as combination of the Sales, Customer Service and Support, and Marketing market segments; Current TAM defined as combination of the Sales, Customer Service and Support, Marketing, Collaboration and Social Software, Portal Products and User Interaction Tools, Dynamic Web Application Tools, Java Platform AD Tools, Microsoft.NET Platform AD Tools, Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Process Management Suites, Application Services Governance, User Provisioning, and Web Access Management market segments.tam with Analytics defined as combination of Current TAM (as defined above), Analytic Applications and Performance Management, CPM Suites, and BI Platforms market segments.

21 CRM is Only Half of the FY14 TAM Story Collaboration: $3B Platform: $15B Business Intelligence: $13B Marketing: $4B Customer Service & Support: $8B Sales: $5B CRM: $17B Current TAM: $35B CRM ($17B) Current TAM ($35B) TAM with Analytics ($48B) Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: Source: Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; Percentages represent CAGR from CY13-CY18. Business Intelligence Market defined as combination of the Analytic Applications and Performance Management, CPM Suites, and BI Platforms market segments; Platform defined as combination of the Dynamic Web Application Tools, Java Platform AD Tools, Microsoft.NET Platform AD Tools, Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Process Management Suites, Application Services Governance, User Provisioning, and Web Access Management market segments.

22 Sales: Extending Our #1 Position $9B 37% 38% by % Change in Share Salesforce Microsoft SAP Oracle 2.9% 1.9% 0.3% 4.4% 41.1% 14.7% 9.6% 15.1% Sales Market Share 2 Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: 1 Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; 2 Gartner Inc., Market Share: All Software Markets, Worldwide, 2013; Change in market share represents absolute difference in market share between 2013 and 2012.

23 Service: Fast Approaching #1 $14B by % Change in Share % Salesforce Oracle Microsoft SAP 6% 2.7% 0.5% 0.5% 0.8% 12.0% 10.5% 6.3% 13.7% Customer Service and Support Market Share 2 Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: 1 Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; 2 Gartner Inc., Market Share: All Software Markets, Worldwide, 2013; Change in market share represents absolute difference in market share between 2013 and 2012.

24 Marketing: Expands Footprint $12B by % Change in Share Salesforce Adobe Oracle IBM 3% 3% 3.6% 0.9% 0.5% 0.5% 6.1% 16.7% 7.7% 14.9% Marketing Market Share 2 Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: 1 Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; 2 Gartner Inc., Market Share: All Software Markets, Worldwide, 2013; Change in market share represents absolute difference in market share between 2013 and 2012.

25 Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: 1 Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; 2 Gartner Inc., Market Share: All Software Markets, Worldwide, 2013; Change in market share represents absolute difference in market share between 2013 and Platform & Other defined as combination of the Dynamic Web Application Tools, Java Platform AD Tools, Microsoft.NET Platform AD Tools, Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Process Management Suites, Application Services Governance, User Provisioning, Web Access Management, Collaboration and Social Software, and Portal Products and User Interaction Tools market segments. Platform: Our Largest Addressable Market $26B by Change in Share % Salesforce Microsoft IBM Oracle 2% 1% 0.9% 0.2% 0.0% 0.8% 2.6% 13.9% 21.3% 16.6% Platform & Other Market Share 2

26 We Have Runway Across Existing Markets 37% 41% 38% 6% Sales Market Share 10% 12% 3% Customer Service and Support Market Share % 6% Marketing Market Share % 2% 3% Platform & Other Market Share 2013 Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: Gartner Inc., Market Share: All Software Markets, Worldwide, 2013; Platform & Other defined as combination of the Dynamic Web Application Tools, Java Platform AD Tools, Microsoft.NET Platform AD Tools, Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Process Management Suites, Application Services Governance, User Provisioning, Web Access Management, Collaboration and Social Software, and Portal Products and User Interaction Tools market segments.

27 And One More Thing Our clouds represent 4 of the top 8 pure-play cloud companies by revenue as of Q2 CY14 Source: company filings. Amounts in millions.

28 Shift to the Cloud Expands the Market Five Year TCO per User 1.8x software market multiplier Services 59% 48% 16% Infrastructure Software 21% 20% On Premise 36% Total Cost Savings Services Software as a Service Cloud Source: IDC, September IDC custom research for salesforce. Infrastructure includes server, networking and storage hardware, power and facilities. Labor/Services include implementation, admin/upgrade personnel costs and training expense; software includes license and maintenance. Data drawn from five studies of over 50 companies.

29 No One is Better Positioned in the Cloud 100% 10% 7% 5% Salesforce Microsoft SAP Oracle Quarterly Cloud Subscriptions as a Percentage of Total Revenue Source: Salesforce Q2 15 earnings press release; Oracle Analyst day Microsoft Q4 FY14 earnings press release. SAP Q2 FY14 press release. Microsoft cloud % = $4.4B cloud run rate / 4 as % of commercial licensing revenue. SAP cloud % = cloud subscriptions & support revenue / software and support revenue. Oracle cloud % = cloud software as a service and platform as a service / software and cloud revenues.

30 David Havlek SVP, Finance and Strategy

31 years Financial Review Market Opportunity Salesforce Advantage 15 Economic Model

32 Salesforce: The CRM Standard Sales Service Analytics Marketing Community Platform The Customer Success Platform

33 Destination for Top Industry Talent World s #1 CRM company World s most admired software company #1 most admired in software #7 best company to work for World s most innovative company TH YEAR IN A ROW! *Source: IDC Worldwide Semiannual Software Trackers for 1H 2013 and 2H 2013

34 Proven and Trusted Global Infrastructure Japan Datacenter: Live in 2011 Canada Datacenters: Announced 2014 UK Datacenter: Scheduled to go live in 2014 France Datacenter: Scheduled to go live in 2015 Germany Datacenter: Scheduled to go live in 2015

35 Unmatched Customer Success in the Cloud at Scale Transaction Volume 99.98% 130B Q2 15 availability Transaction Growth: 52% y/y Average Page Time: 217ms Custom Applications: ~500,000 Q411 Q412 Note: Data as of Q2 15. Q413 Q414 Q215

36 Leading Cloud Developer and ISV Ecosystem 2,500+ AppExchange Apps 1.7M next gen developers on our platform Launch

37 Cloud Fueling Next Generation Partner Ecosystem 82% Cloud Sherpas + CipherCloud Q2 15 y/y growth in joint sales with SIs1 68% Q2 15 y/y growth in certifications at SIs 1Represents Q2 15 y/y growth in dollars of new business. ***Represent 2014 Partner Innovation Award recipients. Deloitte + Apttus Etherios + Conga Accenture + FinancialForce

38 Customer Evangelism Drives Growth and Value 20% 150, % of customers would recommend to others1 customers 10% 0% Q411 Q412 Q413 Q414 Dollar Attrition Note: Chart of dollar attrition as a percentage of revenue when compared to the year-ago period for Sales Cloud, Service Cloud and the Force.com Platform. 1Salesforce.com Customer Relationship Survey Results, Comfirmit CustomerSat, May Q215

39 Significant Opportunity in the Enterprise Revenue by Customer Segment 50:50 $82B 70% $41B 30% 2011 SMB Enterprise SMB 2018 Enterprise Salesforce s TAM by Customer Segment Source: Salesforce company data and industry reports. SMB represents companies with less than 1,000 employees. Enterprise represents companies with greater than 1,000 employees.

40 Enterprise Traction With More Room to Grow ~800 Top 100 Customers as a Percent of Total Revenue ~20% customers pay us more than $1M annually Top 100 Remaining

41 Land and Expand: 4x $9.7M Example: Annual revenue from a Financial Services customer $2.4M FY11 FY12 FY13 FY14 Note: Amounts represent expected annual revenue contribution as of June 30 for the respective fiscal year. Current

42 Land and Expand: 10x $15.4M Example: Annual revenue from a Media/Communications customer $1.4M FY11 FY12 FY13 FY14 Note: Amounts represent expected annual revenue contribution as of June 30 for the respective fiscal year. Current

43 Land and Expand: 30x $16.2M Example: Annual revenue from a Manufacturing customer $0.5M FY11 FY12 FY13 FY14 Note: Amounts represent expected annual revenue contribution as of June 30 for the respective fiscal year. Current

44 Expanding Within Our Top Customers 3x Seven- and eight-figure transactions are great. But we also really want nine-figure relationships. -Keith Block FY11 FY12 FY13 FY14 Annual revenue generated by cohort of our top 50 customers as of Q2 FY15 who have been customers since at least Q2 FY11. FY15

45 Industry Verticals Drive Strategic Value $20B $15B Target largest industries Focus on industry knowledge sales enablement ISV and SI partner momentum Develop industry specific product extensions $10B $5B $0 Salesforce 2018 TAM by Industry Source: Salesforce company data and industry reports.

46 Lots of Room to Grow in the Americas Americas: $19B CY13 opportunity1 $44B CY18 opportunity1 14% The U.S. application software market is larger than the next 17 countries, combined, and represents 44% of global total.3 Americas share in Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: 1Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; 2Gartner Inc., Market Share: All Software Markets, Worldwide, 2013; 3 Gartner Market Databook, 3Q14 Update; Americas Opportunity defined as combination of the Analytic Applications and Performance Management, CPM Suites, BI Platforms, Sales, Customer Service and Support, Marketing, Dynamic Web Application Tools, Java Platform AD Tools, Microsoft.NET Platform AD Tools, Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Process Management Suites, Application Services Governance, User Provisioning, Web Access Management, Collaboration and Social Software, and Portal Products and User Interaction Tools market segments in the EMEA and APAC regions. Market share represents Salesforce s share of the above segments in the Americas.

47 Potential Billion Dollar Geographies EMEA: $10B CY13 opportunity1 APAC: $5B CY13 opportunity1 $24B CY18 opportunity1 $12B CY18 opportunity1 8% 6% EMEA share in APAC share in Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: 1Gartner Forecast Enterprise Software Markets, Worldwide, , 3Q14 Update; 2Gartner Inc., Market Share: All Software Markets, Worldwide, 2013; EMEA Opportunity and APAC Opportunity defined as combination of the Analytic Applications and Performance Management, CPM Suites, BI Platforms, Sales, Customer Service and Support, Marketing, Dynamic Web Application Tools, Java Platform AD Tools, Microsoft.NET Platform AD Tools, Other Application Development, Testing, Security Testing (DAST and SAST), Application Platforms, Business Process Management Suites, Application Services Governance, User Provisioning, Web Access Management, Collaboration and Social Software, and Portal Products and User Interaction Tools market segments in the EMEA and APAC regions. Market share represents Salesforce s share of the above markets in EMEA and APAC.

48 Targeting the Most Important Software Markets 74% of global enterprise app software spending represented by our top eight countries. Calculations performed by Salesforce, Charts/graphics created by Salesforce based on Gartner research; Source: Gartner Market Databook, 3Q14 Update; IT Spending Forecast by Country and Segment data represents Enterprise Application Software spending in 2018.

49 15 years Financial Review Market Opportunity Salesforce Advantage Economic Model

50 Economic Drivers of Lifetime Value Cost to Book (CTB) What does it cost to book $1 of recurring revenue? Attrition What s the expected lifetime revenue from $1 recurring revenue? Cost to Serve (CTS) How much does it cost to serve the lifetime revenue?

51 Lifetime Economics Cumulative Profit Total CTB Breakeven Time Attrition

52 Effects of Lower Cost to Book Cumulative Profit Total CTB Breakeven Time Attrition

53 Effects of Lower Attrition Cumulative Profit Total CTB Breakeven Time Attrition 1 Attrition 2

54 Effects of Lower CTS or Add-On/Upgrade unit economics support Cumulative Profit Mid-30s long-term op margins Total CTB Time Attrition

55 Uniquely Positioned for Industry-Leading Growth years Growth Advantage Compelling Unit Economics 15 Strong Financial Model Huge Market Opportunity

56

57 Appendix

58 GAAP to Non-GAAP Reconciliation (in 000's) FY15 (YTD) FY14 FY13 FY12 FY11 FY10 Non-GAAP gross profit GAAP gross profit $ 1,945,187 $ 3,102,575 $ 2,366,616 $ 1,777,653 $ 1,333,326 $ 1,047,658 Plus: Amortization of purchased intangibles 49, ,356 77,249 60,069 15,459 8,010 Stock-based expenses 24,787 45,608 33,757 17,451 12,158 12,570 Non-GAAP gross profit $ 2,019,917 $ 3,257,539 $ 2,477,622 $ 1,855,173 $ 1,360,943 $ 1,068,238 Non-GAAP operating profit GAAP income (loss) from operations $ (88,775) $ (286,074) $ (110,710) $ (35,085) $ 97,497 $ 115,272 Plus: Amortization of purchased intangibles 79, ,535 88,171 67,319 19,668 11,251 Stock-based expenses 273, , , , ,429 88,892 Non-GAAP operating profit $ 264,284 $ 363,741 $ 356,811 $ 261,492 $ 237,594 $ 215,415 As Margin % Revenue $ 2,545,323 $ 4,071,003 $ 3,050,195 $ 2,266,539 $ 1,657,139 $ 1,305,583 GAAP gross margin 76.4% 76.2% 77.6% 78.4% 80.5% 80.2% Non-GAAP gross margin 79.4% 80.0% 81.2% 81.9% 82.1% 81.8% GAAP operating margin -3.5% -7.0% -3.6% -1.5% 5.9% 8.8% Non-GAAP operating margin 10.4% 8.9% 11.7% 11.5% 14.3% 16.5%